US-China: The Great Decoupling

Markets have been watching with bated breath the ups and downs in bilateral negotiations between the US and China as the two sides seek to resolve a tariff tit-for-tat that has escalated into a trade war. But what many observers may have failed to notice is that the negotiating process has also laid bare a deepening gulf between the two countries, on issues that go well beyond trade. Indeed, the trade dispute has highlighted each government’s growing mistrust of the other. As a result, while both sides continue to seek a negotiated solution to resolve the trade war, talk of the US ‘decoupling’ from China is gaining prominence in the US, while Beijing is looking to hedge its reliance on the US. The working assumption is now that US-China relations are likely to become increasingly fraught, well beyond the Trump era.

As the trade dispute has also escalated the technological rivalry between the two governments, businesses and markets globally are grappling with what a US-China decoupling, or an ‘economic iron curtain’ could look like. The implications for energy are therefore manifold, and this Energy Insight aims to unpack some of the short-term dynamics, including the impact on China’s oil and gas demand growth, but also to consider the longer-term outcomes for China’s energy policies, given the re-emergence of supply security concerns in China.


By: Michal Meidan